Tuesday, June 10, 2014

Gilead Sciences (GILD) Buy Op & Other Thoughts

New post at Seeking Alpha:

Gilead Sinks on Merck-Idenix Deal, in which I argue Gilead is not very threatened and remains undervalued. I am overweight in Gilead, and in for the long run, but if you don't own Gilead it is worth a look. My best guess is that the cash keeps rolling in from Hepatitis C cures, and GILD is up another 50% or so over the next year or so, and even that will leave it at a lower P/E.

I am not going to cover it, but I bought an incredibly tiny amount of Opexa Therapeutics (OPXA) on May 29. I already own Biogen Idec (BIIB), so I know a bit about multiple sclerosis. Opexa has a totally different approach, an immunological one, and results are mixed so far, but a Phase II trial is underway. The results are not due until 2016, and then usually even with positive data a Phase III trial would be needed. So it is both a long shot and a long term investment.

I think the market overall is fairly valued on a current basis, which means about 1/2 of stocks are overvalued and 1/2 undervalued. So it is a stock-picker's market. On the other hand, I believe the economy has years of expansion ahead of it, so in 3 to 5 years I expect the market to be up. In that case, even an index fund would do more for your savings than CDs or bonds. We are not in a stock market bubble yet, but if one appears, sell into it (most people buy into bubbles, that is why they are bubbles).

What stocks are overvalued or undervalued is a matter of opinion. I tend to look two to three years out, so I include the value of biotechnology pipelines.